Question

1 Approved Answer

Posted on Sep 22, 2024

Assume that, the data given in Exhibit 3 represents the most recent data over the past 17 years. Only for the US market, what would

Assume that, the data given in Exhibit 3 represents the most recent data over the past 17 years. Only for the US market, what would you guess for the market return to be for 2021? In other words, make a guess for the year 2021 using the data given in Exhibit 3.

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Exhibit 3 Annual Stock Market Returns for 14 Countries Date Bond Bond Return Bond Return Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Australia Market Stock Capitalizat Return ion -16.37 39,737 -14.42 28,309 68.08 41,810 -7.20 34,093 45.42 39,727 50.78 58,022 4.86 63,975 24.28 93,581 19.82 100,359 -14.87 78,567 35.99 107,866 4.46 96,824 40.96 137,181 -7.65 143,349 21.19 169,490 12.36 200,745 13.10 193, 164 -3.30 31.20 9.51 12.15 6.57 25.47 18.91 14.58 14.67 21.24 37.98 16.62 33.23 -21.50 18.96 17.68 19.51 Austria Market Stock Capitalizat Return ion -15.79 1,009 -1.88 889 14.92 862 7.90 801 103.14 2,023 12.05 3,024 -16.28 3,946 8.34 4,983 82.61 10,184 -1.51 10,687 -13.07 11,710 -9.63 9,689 43.89 12,909 -9.73 13,125 -12.69 17,459 18.04 20,516 15.95 22,040 3.77 21.90 13.56 8.27 10.54 9.46 9.19 9.29 -1.96 3.08 9.21 15.29 20.63 -5.24 20.73 12.30 4.78 Belgium Market Stock Capitalizat Return ion 10.48 7,456 24.32 7,893 42.82 8,885 22.89 9,268 42.72 15,345 43.65 26,864 -13.42 29,366 52.03 41,542 13.54 50,371 -20.81 44,284 17.33 52,652 3.15 49,200 37.58 60,366 -5.18 64,811 19.64 20.48 90,456 33.37 106,879 6.27 21.62 17.84 14.61 24.47 22.16 5.30 8.80 -3.16 8.20 15.06 17.54 17.96 -5.06 23.07 12.11 9.89 France Market Stock Capitalizat Return ion -12.38 26,447 8.79 22,970 62.29 29,170 20.12 29,529 48.59 53,943 53.38 100,302 -26.77 103,591 56.81 150,582 33.17 217,189 -22.74 195,888 21.15 243,055 5.94 234,464 30.04 312,041 -14.36 330,407 3.64 371,700 30.88 441,339 31.01 514,162 4.59 24.21 23.59 21.32 22.36 21.98 3.14 20.30 4.80 6.05 18.10 12.07 26.69 -6.17 18.25 14.69 8.97 80,301 Date Bond Return Stock Return Bond Return Stock Return Bond Return Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Germany Market Stock Return Capitalizat ion 3.27 57,569 19.42 61,691 40.75 73,880 11.06 69,496 79.47 155,940 7.23 211,692 -38.47 162,908 31.09 200,860 37.46 282,378 -18.36 260,676 8.13 266,741 4.29 238,333 45.85 326,772 -7.93 339,363 7.58 400,968 27.95 495,237 40.01 606,704 4.11 23.10 7.09 18.14 11.69 11.89 3.10 2.98 -2.93 -2.06 12.39 16.31 19.53 6.14 21.97 6.98 4.78 4.26 -5.61 76.75 -0.91 66.23 54.20 -11.41 43.60 37.16 -26.33 17.78 -9.58 61.34 5.35 25.29 25.93 45.30 Ireland Market Capitalizat ion 1,316 995 1,404 1,147 2,286 4,350 4,963 7,340 9,785 8,162 10,337 8,528 12,228 14,756 19,237 25,440 33,347 5.11 38.04 16.71 12.36 34.31 5.42 28.15 25.57 3.15 7.00 14.96 5.81 30.91 -10.87 20.36 13.60 16.69 4.62 -10.55 22.92 30.84 108.42 73.73 -32.59 26.41 15.29 -27.72 2.22 -5.59 49.20 7.41 -1.19 10.98 64.80 Italy Market Capitalizat ion 23,528 18,073 17,915 19,532 45,693 106,518 85,250 96,192 114,032 89,919 103,415 77,353 102,478 133,167 139,736 170,052 252,960 -3.10 27.56 36.26 44.70 18.67 50.21 -3.98 14.52 -1.24 8.41 26.60 1.68 56.52 -13.11 17.69 49.12 25.69 Japan Market Stock Capitalizat ion 21.90 358,043 5.72 439,744 26.49 509,844 29.18 509,844 14.16 725,436 56.86 1,455,105 8.13 2,137,715 38.09 2,964,727 20.47 3,150,654 -38.94 2,027,842 0.85 2,358,345 -21.42 1,826,976 13.59 2,270,842 7.08 2,747,311 0.35 2,846,585 -6.98 2,386,941 -16.06 1,812,145 18.49 10.83 9.47 10.48 10.59 14.17 7.84 5.36 -3.83 -0.09 15.20 12.66 17.13 -3.49 15.48 3.75 3.85 Date 1981 1982 1983 1984 1985 Netherland Market Stock Bond Return Capitalizat Return ion 1.31 19,952 5.76 24.85 21,604 29.26 56.95 28,191 7.93 28.91 29,677 15.85 32.58 48,023 15.20 8.10 65,100 11.77 -18.70 66,162 4.26 31.20 75,787 5.22 26.89 106,486 -2.03 -13.25 101,225 -0.97 17.23 112,860 11.32 9.00 110,892 19.02 46.31 159,107 16.98 181,095 -6.18 20.89 231,344 17.20 35.34 290,811 9.09 46.43 363,562 11.21 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 New Zealand Market Stock Capitalizat Bond Return Return ion 10.05 4,118 14.58 -19.02 2,931 11.43 95.93 5,066 27.01 -0.57 3,508 -20.39 46.88 5,083 18.10 104.09 9,702 22.95 -35.61 7,396 20.88 -2.64 9,120 20.43 20.65 10,139 21.78 -34.78 6,516 12.28 26.42 11,550 40.53 0.19 10,591 15.66 55.63 17,072 20.88 -3.75 18,908 -12.72 15.64 22,404 19.53 11.19 24,446 11.12 6.89 19,631 6.79 South Africa Market Stock Bond Return Capitalizat Return ion -0.32 29,105 3.99 50.82 36,353 28.94 16.23 43,604 -2.18 11.53 27,711 2.08 38.72 20,221 7.90 59.67 27,349 35.09 -3.90 39,421 15.35 7.97 33,229 8.18 62.56 56,242 23.88 -7.12 53,254 18.85 30.49 96,672 12.77 -7.05 58,864 26.63 66.13 104,746 31.24 23.27 130,245 -11.15 4.69 139,970 30.70 8.15 117,848 4.88 -11.09 95,414 27.88 Switzerland Market Stock Bond Return Capitalizat Return ion -9.94 23,243 -0.14 12.70 22,587 13.72 26.15 25,662 3.07 1.56 21,677 1.99 58.91 41,534 6.25 10.95 64,444 7.43 -34.49 57,494 6.48 11.60 66,135 27.19 85,831 -3.84 -20.82 90,166 -0.20 20.91 116,529 8.14 24.60 145,659 14.02 48.05 212,466 15.70 -7.29 224,792 4.28 28.05 329,869 18.50 19.37 339,927 5.03 53.42 482,030 8.94 1.07 1.95 Date Bond Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 UK Market Stock Capitalizat Return ion 12.83 184,752 28.52 191,266 25.97 210,607 30.18 211,340 22.84 302,349 26.29 403,071 7.90 562,787 10.08 567,570 37.39 665,860 -8.26 705,011 20.87 800,896 19.55 757,364 24.59 917,948 -6.95 903,719 26.36 1,097,924 15.79 1,392,185 24.75 #REF! 2.08 51.53 20.31 9.96 11.14 9.16 21.88 9.54 5.96 8.07 18.82 14.301 40.52 -9.98 18.07 9.42 22.98 US Market Stock Capitalizat Return ion -3.61 893,430 22.44 1,049,433 22.55 1,222,131 6.24 1,228,621 32.23 1,554,711 17.68 1,743,364 4.74 1,800,268 17.84 1,956,196 32.40 2,355,377 -3.49 2,186,563 29.16 2,900,656 5.90 3,074,287 10.29 3,332,434 1.56 3,296,047 36.99 4,935,800 21.29 5,926,178 34.41 8,003,025 1.90 39.16 0.58 14.22 29.74 25.21 -3.45 9.94 17.98 6.85 18.17 8.07 16.94 6.19 31.54 -1.44 14.51 Exhibit 3 Annual Stock Market Returns for 14 Countries Date Bond Bond Return Bond Return Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Australia Market Stock Capitalizat Return ion -16.37 39,737 -14.42 28,309 68.08 41,810 -7.20 34,093 45.42 39,727 50.78 58,022 4.86 63,975 24.28 93,581 19.82 100,359 -14.87 78,567 35.99 107,866 4.46 96,824 40.96 137,181 -7.65 143,349 21.19 169,490 12.36 200,745 13.10 193, 164 -3.30 31.20 9.51 12.15 6.57 25.47 18.91 14.58 14.67 21.24 37.98 16.62 33.23 -21.50 18.96 17.68 19.51 Austria Market Stock Capitalizat Return ion -15.79 1,009 -1.88 889 14.92 862 7.90 801 103.14 2,023 12.05 3,024 -16.28 3,946 8.34 4,983 82.61 10,184 -1.51 10,687 -13.07 11,710 -9.63 9,689 43.89 12,909 -9.73 13,125 -12.69 17,459 18.04 20,516 15.95 22,040 3.77 21.90 13.56 8.27 10.54 9.46 9.19 9.29 -1.96 3.08 9.21 15.29 20.63 -5.24 20.73 12.30 4.78 Belgium Market Stock Capitalizat Return ion 10.48 7,456 24.32 7,893 42.82 8,885 22.89 9,268 42.72 15,345 43.65 26,864 -13.42 29,366 52.03 41,542 13.54 50,371 -20.81 44,284 17.33 52,652 3.15 49,200 37.58 60,366 -5.18 64,811 19.64 20.48 90,456 33.37 106,879 6.27 21.62 17.84 14.61 24.47 22.16 5.30 8.80 -3.16 8.20 15.06 17.54 17.96 -5.06 23.07 12.11 9.89 France Market Stock Capitalizat Return ion -12.38 26,447 8.79 22,970 62.29 29,170 20.12 29,529 48.59 53,943 53.38 100,302 -26.77 103,591 56.81 150,582 33.17 217,189 -22.74 195,888 21.15 243,055 5.94 234,464 30.04 312,041 -14.36 330,407 3.64 371,700 30.88 441,339 31.01 514,162 4.59 24.21 23.59 21.32 22.36 21.98 3.14 20.30 4.80 6.05 18.10 12.07 26.69 -6.17 18.25 14.69 8.97 80,301 Date Bond Return Stock Return Bond Return Stock Return Bond Return Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Germany Market Stock Return Capitalizat ion 3.27 57,569 19.42 61,691 40.75 73,880 11.06 69,496 79.47 155,940 7.23 211,692 -38.47 162,908 31.09 200,860 37.46 282,378 -18.36 260,676 8.13 266,741 4.29 238,333 45.85 326,772 -7.93 339,363 7.58 400,968 27.95 495,237 40.01 606,704 4.11 23.10 7.09 18.14 11.69 11.89 3.10 2.98 -2.93 -2.06 12.39 16.31 19.53 6.14 21.97 6.98 4.78 4.26 -5.61 76.75 -0.91 66.23 54.20 -11.41 43.60 37.16 -26.33 17.78 -9.58 61.34 5.35 25.29 25.93 45.30 Ireland Market Capitalizat ion 1,316 995 1,404 1,147 2,286 4,350 4,963 7,340 9,785 8,162 10,337 8,528 12,228 14,756 19,237 25,440 33,347 5.11 38.04 16.71 12.36 34.31 5.42 28.15 25.57 3.15 7.00 14.96 5.81 30.91 -10.87 20.36 13.60 16.69 4.62 -10.55 22.92 30.84 108.42 73.73 -32.59 26.41 15.29 -27.72 2.22 -5.59 49.20 7.41 -1.19 10.98 64.80 Italy Market Capitalizat ion 23,528 18,073 17,915 19,532 45,693 106,518 85,250 96,192 114,032 89,919 103,415 77,353 102,478 133,167 139,736 170,052 252,960 -3.10 27.56 36.26 44.70 18.67 50.21 -3.98 14.52 -1.24 8.41 26.60 1.68 56.52 -13.11 17.69 49.12 25.69 Japan Market Stock Capitalizat ion 21.90 358,043 5.72 439,744 26.49 509,844 29.18 509,844 14.16 725,436 56.86 1,455,105 8.13 2,137,715 38.09 2,964,727 20.47 3,150,654 -38.94 2,027,842 0.85 2,358,345 -21.42 1,826,976 13.59 2,270,842 7.08 2,747,311 0.35 2,846,585 -6.98 2,386,941 -16.06 1,812,145 18.49 10.83 9.47 10.48 10.59 14.17 7.84 5.36 -3.83 -0.09 15.20 12.66 17.13 -3.49 15.48 3.75 3.85 Date 1981 1982 1983 1984 1985 Netherland Market Stock Bond Return Capitalizat Return ion 1.31 19,952 5.76 24.85 21,604 29.26 56.95 28,191 7.93 28.91 29,677 15.85 32.58 48,023 15.20 8.10 65,100 11.77 -18.70 66,162 4.26 31.20 75,787 5.22 26.89 106,486 -2.03 -13.25 101,225 -0.97 17.23 112,860 11.32 9.00 110,892 19.02 46.31 159,107 16.98 181,095 -6.18 20.89 231,344 17.20 35.34 290,811 9.09 46.43 363,562 11.21 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 New Zealand Market Stock Capitalizat Bond Return Return ion 10.05 4,118 14.58 -19.02 2,931 11.43 95.93 5,066 27.01 -0.57 3,508 -20.39 46.88 5,083 18.10 104.09 9,702 22.95 -35.61 7,396 20.88 -2.64 9,120 20.43 20.65 10,139 21.78 -34.78 6,516 12.28 26.42 11,550 40.53 0.19 10,591 15.66 55.63 17,072 20.88 -3.75 18,908 -12.72 15.64 22,404 19.53 11.19 24,446 11.12 6.89 19,631 6.79 South Africa Market Stock Bond Return Capitalizat Return ion -0.32 29,105 3.99 50.82 36,353 28.94 16.23 43,604 -2.18 11.53 27,711 2.08 38.72 20,221 7.90 59.67 27,349 35.09 -3.90 39,421 15.35 7.97 33,229 8.18 62.56 56,242 23.88 -7.12 53,254 18.85 30.49 96,672 12.77 -7.05 58,864 26.63 66.13 104,746 31.24 23.27 130,245 -11.15 4.69 139,970 30.70 8.15 117,848 4.88 -11.09 95,414 27.88 Switzerland Market Stock Bond Return Capitalizat Return ion -9.94 23,243 -0.14 12.70 22,587 13.72 26.15 25,662 3.07 1.56 21,677 1.99 58.91 41,534 6.25 10.95 64,444 7.43 -34.49 57,494 6.48 11.60 66,135 27.19 85,831 -3.84 -20.82 90,166 -0.20 20.91 116,529 8.14 24.60 145,659 14.02 48.05 212,466 15.70 -7.29 224,792 4.28 28.05 329,869 18.50 19.37 339,927 5.03 53.42 482,030 8.94 1.07 1.95 Date Bond Bond Return Return 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 UK Market Stock Capitalizat Return ion 12.83 184,752 28.52 191,266 25.97 210,607 30.18 211,340 22.84 302,349 26.29 403,071 7.90 562,787 10.08 567,570 37.39 665,860 -8.26 705,011 20.87 800,896 19.55 757,364 24.59 917,948 -6.95 903,719 26.36 1,097,924 15.79 1,392,185 24.75 #REF! 2.08 51.53 20.31 9.96 11.14 9.16 21.88 9.54 5.96 8.07 18.82 14.301 40.52 -9.98 18.07 9.42 22.98 US Market Stock Capitalizat Return ion -3.61 893,430 22.44 1,049,433 22.55 1,222,131 6.24 1,228,621 32.23 1,554,711 17.68 1,743,364 4.74 1,800,268 17.84 1,956,196 32.40 2,355,377 -3.49 2,186,563 29.16 2,900,656 5.90 3,074,287 10.29 3,332,434 1.56 3,296,047 36.99 4,935,800 21.29 5,926,178 34.41 8,003,025 1.90 39.16 0.58 14.22 29.74 25.21 -3.45 9.94 17.98 6.85 18.17 8.07 16.94 6.19 31.54 -1.44 14.51